Asciano (AIO)

Morgan Stanley has upgraded
Asciano
to “overweight" from “equal-weight" and lifted its price target by 10¢ to $5.50 a share as it believes the market has an overly bearish view on the company.

The broker notes that Asciano has endured a material derating over the past three years and is currently trading on a 2011-12 price earnings of around 13 times – or about a 10 per cent discount to the industrials sector – when it should be trading at a 10 per cent premium given the broker’s forecast earnings before interest and tax growth of 14 per cent a year through to 2013-14.

This will still put Morgan Stanley’s forecast earnings per share below consensus estimates for 2012-13 and 2013-14, although the broker acknowledges the large degree of uncertainty on the company’s growth.

However, the company’s third-quarter update showed that volumes remain robust despite the weak domestic economy and one-off events, such as bad weather, strikes at Port Kembla and coal chain congestion.